Working Magic off the basketball court

Working Magic off the basketball court
NBA star Johnson follows hoops career with a string of business successes
By Ian P. Paisley
CNBC
updated 10:05 a.m. ET May 6, 2008
LOS ANGELES - He may not be the star of the Los Angeles Lakers anymore, but take a trip back to the hallowed hardwood with Magic Johnson, and the glory days come rushing back.

“Just like when I walked out here, it took me back from when I was coming down on the fast break and doing my thing,” said Johnson on a recent visit to the Lakers' home court at the Staples Center in Los Angeles. “I don't want to go back or be in the NBA or be in basketball. But it's nice to reflect.”

Standing with Johnson courtside, it’s obvious that 12 years and 30 pounds haven’t erased his signature moves, including his famous “no look” pass.

“That never goes away,” he said. “I can come down here now, and I know I'll always know how to run a team.”

For the past decade he’s run a new team — Magic Johnson Enterprises — an empire estimated to be worth more than $700 million. He’s built his business by opening upscale stores in a place corporate America had all but ignored: the inner city.

Today, he has 116 Starbucks, 31 Burger Kings, a dozen 24 Hour Fitness Gyms, and a T.G.I. Fridays. He says other companies considered similar moves but were afraid to move into the neighborhoods Johnson has invested in.

“No question about it; they were all scared,” he said. “Scared they were going to lose money. They didn’t know how to do business in these communities so they just said, ‘We don’t need the headache.’ And they went elsewhere.”

But Johnson saw an opportunity and in 1995 scored a deal with Sony, opening movie theaters in South Central Los Angeles and Harlem. Johnson says the business community initially looked at him “as a joke” — wondering what a basketball player knew about running a business.

It turned out he knew plenty. He convinced Starbucks CEO Howard Schultz to do something he’d never done before or since — take on a partner.

“Howard Schultz took a chance,” said Johnson. “Not only with his company but with his brand. And he put it in my hand and said, ‘Look, I’m trusting you with this brand and I hope you know what you’re doing.’ ”

Johnson said his goal was to give minority consumers options that they never had before.

“If they don’t want to pay four bucks for a cup of coffee at Starbucks that’s okay,” he said. “But as long as they know it’s sitting there.”

Johnson’s impact was evident on a recent trip to LA’s Ladera Heights, where he opened his first Starbucks and T.G.I. Fridays 10 years ago. Before he arrived, the only restaurants in the neighborhood served fast food or soul food. Now, the Ladera Shopping Center is booming as other retailers have followed Magic’s lead.

In this community, he’s every bit the star he was on the court — approachable and gracious to a fault, whether the cameras were rolling or not.

“I’m a part of the fabric of the community,” he said. “And they know that I invested in them. I didn’t talk about it, I was a man about it.”

His latest venture has the business world buzzing; Canyon Johnson Funds has raised $2 billion to finance real estate projects in cities across the country.

“Now they’re saying, ‘OK, let’s get together now,’ ” he said with a laugh. “I had to bang down doors. I had to really show them that I was a serious business man. Then, the track record had to come.”

As a mogul, Magic Johnson may be bigger now than he was in the NBA, which is why some of today’s star athletes, like Alex Rodriguez, have turned to him for advice.


“He is probably one of the top three greatest basketball players to ever lace them up and to say that perhaps he’s had a better business career,” said Rodriguez. “It is quite remarkable.”

With a $275 million contract, A-Rod is the highest paid player in baseball, yet he’s already talking to Magic about life after the big leagues.

“He’s done so much, and he’s just really been a university of knowledge and example for all of us that are playing today,” said Rodriguez. “He has great common sense. If you talk to him about business, he doesn’t over complicate it. He likes looking outside the building, looking at a business and within four or five minutes — kind of like Warren Buffet — Does it make sense, or it doesn’t make sense?”


Johnson’s company does business in 85 cities and 21 states, and he runs it all from an office tower in the heart of Beverly Hills. Not bad for a kid who grew up one of 10 children in Lansing, Mich. He says he got his work ethic from his parents.

“Because my dad worked two jobs — General Motors as well as he had a trash hauling service,” said Johnson. “My mother worked for the local school in the cafeteria.”

As a teenager, “Earvin” Johnson was a stand-out on his high school team, and worked part-time cleaning offices.

“And I would always stop to the 7th floor of my favorite office and I would bust in the door like I was already the CEO,” he said.

But his biggest dream was to be a successful basketball player. He won a National Championship at Michigan State, five NBA titles over 13 seasons and three Most Valuable Player awards. With countless magazine covers and lucrative endorsements, Johnson had an appeal that transcended the NBA.

But while he was lighting it up with the Lakers, he was also thinking about making a fast break from basketball to the boardroom. Along the way, he took networking to a whole new level, trying to meet with CEOs on road trips and saying hello to them courtside before the games started.

Johnson also worked the floor at the Forum where Lakers games were the hottest ticket in town. There, he rubbed shoulders with Hollywood heavyweights sitting courtside. That’s how he met super-agent, Michael Ovitz, one of the most connected men in town.

“The man walks in and he's just got this infectious and contagious smile,” Ovitz recalled recently. “And he's also about 15 feet tall compared to an agent. So after we talked, at some length, it was very clear that he wanted to learn… And at the end of the conversation, I explained to him that we weren't involved in representing athletes and that I didn't think that there was any way we could work together.”

Johnson recalls Ovitz as being “very direct” at their first meeting.

“I went in six-nine, and I think I came out five-nine,” he said.

Realizing that Johnson wasn’t just a jock looking to cash-in on his name, Ovitz ultimately agreed to take him on.

“‘He said — ‘What part of the newspaper do you read first?’ Johnson recalled. “And I said, ‘Well, of course, the sports.’ He said, ‘Wrong. That's the wrong answer.’ He said, ‘If you want to be a business man, you’ve got to read the business section.’ ”

It wasn’t long before Ovitz raised the stakes. Pepsi was looking for a partner in a distributorship, and Ovitz pitched Johnson for the role at New York’s famed 21 Club.

“It was like watching a basketball game at a dining table,” said Ovitz. “Earvin came in and he took control of that room. And he got asked some pretty tough questions, and he gave really smart answers.”

Pepsi was so impressed, they picked Johnson, and he became the largest minority owner of a distributorship. Magic was at the top of his game both on and off the court. But in 1991, his magical ride would come to shocking halt. In an emotional press conference, he told his fans he was retiring from the Lakers because he was infected with HIV.

“I said the hardest thing I thought I was going to do was play against Michael Jordan and Larry Bird,” he said “But that wasn’t the hardest thing. It was driving home telling my wife I have HIV. That was the hardest thing I ever had to do in my life. And then wondering whether she’s going to stay with me. What would that mean for her and the baby? Wow… If she had left, you and I wouldn’t be sitting here.”

Today, Johnson is healthy. His HIV is controlled by medications and rigorous exercise — an hour on the bike followed by weightlifting, five days a week. He also runs a foundation dedicated to stopping the spread of HIV (www.magicjohnson.org). And he’s formed partnerships with Aetna Life Insurance and Abbott Pharmaceuticals.


Between his foundation and his company, Johnson is on the road more than 150 days a year, constantly looking for that next deal. On a recent visit to Minneapolis at Best Buy headquarters, he was celebrating his latest score. It was classic Johnson, his trademark smile lighting up the room.

It’s been 12 years since Magic Johnson played in the NBA, but he’s still winning titles, including the one he’s coveted the most.

“Now it not Magic, it’s not Earvin, it’s Mr. Johnson,” he said. “That’s what I wanted to get to… And that day has arrived.”